Source: Penny Stock Detectives
Massive Revenue Growth for this Junior Oil Stock
The volatility in oil prices continues to be quite extreme. These volatile
moves then tend to influence oil stocks, which make more money when oil
prices are increasing. Obviously, for the long-term investor in oil stocks, oil
prices are one component, as is the quantity of reserves a firm has, and the
potential for developing further resources. One method for long-term
investors is to look at relatively smaller and younger oil stocks that can
grow over time.
Triangle Petroleum Corporation
(NYSE/TPLM) is one of the more
interesting oil stocks. It has both
exploration and production
operations within the Bakken Shale
and Three Forks area of North
Dakota and Montana. The company
has over 86,000 net acres of land
available; with potential to grow the
level of barrels produced per day
substantially over the next few years, according to the firm. (Source:
December 2012 Investor Presentation, Triangle Petroleum Corp., accessed
December 20, 2012.)
For the third quarter of fiscal 2013, the company reported total revenue of
$23.2 million, a massive increase from the same quarter last year in which
the firm reported total revenue of only $3.4 million. Net income
attributable to shareholders for the third quarter of 2013 was a profit of
$992,886, compared to a net loss of $2.1 million the same quarter last year.
(Source: “Triangle Petroleum Provides Operational Update, Financial
Results Of Third Quarter Fiscal 2013, And Fiscal Year 2014 Capital
Expenditure Budget,” Triangle Petroleum Corp., December 10, 2012,
accessed December 20, 2012.)
The stock trades with a forward price-to-earnings ratio of 12.5, cash per
share of $1.01 and just over 1.2 times book value. Considering the massive
growth rate in revenue and earnings, the fundamental metrics appear
reasonable. Junior oil stocks can be volatile due to operational issues or
funding limitations.
While oil prices do play a significant role in the value of oil stocks, the ability
for Triangle Petroleum to manage its exploration and production is
extremely crucial to its success. Obviously, since entering the North Dakota
basin in 2010, the firm is on a growth path that is quite fast.
Chart courtesy of www.StockCharts.com
Junior oil stocks can be quite volatile. After having a massive rally, the
recent decline in oil prices is weighing on the stock. The stock had a
substantial pullback from October to the middle of November. At this point,
the stock appears to be forming a base for a potential move up through its
200-day moving average. This level is approximately the 50% retracement
from the low in June to the high at the beginning of October. Oil stocks can
encounter resistance in this area.
I don’t recommend buying any stock when the shares are falling. Catching a
falling knife is a dangerous strategy. What I do suggest is adding this stock
to one’s watch list, and looking for a breakout to the upside. This would
indicate that other investors are attracted to oil stocks, such as this firm,
which would most likely coincide with a strong move up in oil prices.
With oil stocks that are quite new and inexperienced, it takes more than
just oil prices to drive the share price higher. Seasoned investors want to
see that the management of these oil stocks is able to efficiently execute its
development plan, and continue production without any major problems.
While oil prices are beyond the control of management of these oil stocks,
there are many variables they can control, namely costs. I would like to see
several quarters of sustained growth and strong execution for this
company. Also, we have a lot of geopolitical risks that may influence oil
prices next year. Both of these issues are crucial to a sustained move in the
share price for Triangle Petroleum and many other oil stocks.
Source: Penny Stock Detectives